In order to assess the performance of the Fund Manager it is important to consider which funds are being compared. Therefore classification is an important part of the fund rating. The mutual difference between two funds in the same category must be a result of the quality of the Fund Manager and not of the market circumstances, which are ultimately beyond the Fund Manager’s control. For that reason vwd group has chosen to follow the classification of the European Fund Classification Forum (EFCF), a work group of the European Fund and Asset Management. Association (EFAMA). The EFCF has defined a clear set of criteria by which each fund can be unambiguously and objectively categorized.

In order to assess the performance of a Fund Manager even better, the Fund Manager’s alpha, which is calculated relative to all the funds in the same EFCF category, is also taken into account.

The final criterion that is taken into account is the level to which the fund was able to preserve its capital. This refers to the absolute losses in months during which the fund performed worse than the risk-free interest. The reasoning behind this is that investing in a mutual fund does not only give a risk of losing your investment, but also a lower return than a risk-free investment would have given.

A full description of the vwd diamond rating can be found here.

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